Advance Tax in India: Due Dates, Calculator and Procedure

In India, more than 6.77 crore income tax returns were filed for A.Y. 2023–24, reflecting increasing tax compliance. A key aspect many overlooks is that advance tax is mandatory if your total tax liability exceeds ₹10,000 after TDS/TCS. It applies to income beyond salary, such as rent, capital gains, fixed deposits, and lottery winnings.

Advance tax payment must be done in instalments by specific due dates, and delays can attract interest penalties. In this article, we will cover who needs to pay advance tax, how it is calculated, and the consequences of non-payment.

What is Advance Tax?

This type of tax refers to the system of paying income tax in instalments throughout the FY, rather than in a single payment at the time of filing the income tax return. Under this method, individuals, self-employed professionals, and businesses are required to estimate their total income and tax liability in advance and make timely payments on specified due dates during the financial year.

This system ensures a steady flow of revenue for the government and helps taxpayers avoid the financial strain of a large, lump-sum payment at year-end. As per the provisions of the Income-tax Act of 1961, most taxpayers are obligated to estimate their annual income and account for taxes already deducted or collected (such as TDS/TCS), and accordingly pay the balance tax in advance within the financial year itself.

Who Should and Should Not Pay Advance Income Tax?

You must make an advance tax payment by the following categories of taxpayers if their estimated tax liability for the financial year, after accounting for TDS/TCS and MAT credit, is ₹10,000 or more:

• Salaried individuals are generally covered under TDS by their employers. However, if they have additional sources of income, such as interest from dividends, capital gains, rental income, fixed deposits, or side business income, that result in a tax liability of ₹10,000 or more, they must pay advance tax on that income.
• Professionals and businesses opting for presumptive taxation schemes (under Sections 44AD or 44ADA) are also required to pay advance tax if their estimated liability exceeds ₹10,000.
• Non-Resident Indians (NRIs) who earn income in India and whose estimated tax liability is ₹10,000 or more are also liable to pay advance tax.
• All taxpayers, including freelancers, salaried individuals, and business owners.

Senior citizens who meet the following criteria are exempt from paying advance tax:

• Have no income from business or profession
• Resident in India
• Aged 60 years or above during the financial year

Advance Tax Payment Due Dates

An advance tax payment should be made in instalments according to a fixed schedule during the financial year. It is governed by two key sections of the Income-tax Act, 1961: Section 234B and Section 234C.

• Section 234B: If a taxpayer's total advance tax liability exceeds ₹10,000 in a financial year, they must pay at least 90% of the total tax liability by 31st March. Failure to do so attracts interest under Section 234B.
• Section 234C: Section 234C mandates that advance tax must be paid in four instalments during the financial year. The due dates and minimum payment percentages are as follows:

When making advance tax payment, consider these things: 

• Any tax paid on or before 31st March is treated as advance tax. If the due date for any instalment falls on a bank holiday, the payment can be made on the next working day without penalty.
• Interest at 1% per month is levied for delay or shortfall in payment for each instalment, as per the prescribed schedule under Section 234C.
• Taxpayers need to follow the schedule accurately to avoid interest penalties.

How is Advance Tax Calculated?

To calculate your advance tax accurately, follow these steps:

• Add income from all heads, such as Salary, Business or Profession, Capital Gains, House Property, and Other Sources.
• Deduct eligible amounts under sections like 80E, 80D, 80C, etc., from your Gross Total Income to arrive at your Net Taxable Income.
• Apply the applicable income tax slab rates to your Net Taxable Income to determine your total tax dues for the financial year.
• Deduct the total Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) from your total tax dues. The resulting amount is your advance tax liability for the year.

What is Advance Tax Late Payment Interest? 

Failing to pay advance tax on time results in interest penalties under Sections 234B and 234C of the Income Tax Act: 

1. If 90% of the total tax liability is not paid through advance tax or TDS/TCS by 31st March, interest at 1% per month is charged on the unpaid tax amount.
2. Interest is charged for delay in paying the required instalments of advance tax by the due dates under 234C:

How to Make Advance Tax Payment?

Here is a step-by-step guide on how to make an advance tax payment online through the Income Tax Department’s official portal:

• Go to the Income Tax e-Filing Portal and log in using your credentials.
• Click on the ‘Services’ tab and select ‘e-Pay Tax’ from the dropdown menu.
• From the list of available challans, select ‘Challan No./ITNS 280’, which is used for the payment of advance tax.
• Choose the ‘Advance Tax’ option under the ‘Type of Payment’.
• Choose your preferred payment method from Net Banking or Debit Card.
• Double-check all the information entered. Once verified, click on ‘Proceed’ to continue to the payment gateway.
• Make the payment through your selected banking channel.
• Upon successful payment, a challan receipt (with CIN - Challan Identification Number) will be generated. Make sure to advance tax payment challan download or print for your records and for use while filing your income tax return.

To Conclude

Advance tax payment on time is a crucial responsibility for taxpayers with a tax liability of ₹10,000 or more in a financial year. Timely compliance not only ensures smooth cash flow for the government but also helps taxpayers avoid interest penalties under Sections 234B and 234C, which impose 1% interest per month on delayed or insufficient payments.

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